The following is the third in a three-part summary extract from the soon-to-be-published ““Creating Jobs and Enterprise in a new Singapore economy – Ideas for Change” by Tan Jee Say, former secretary to the late Dr Albert Winsemius, the economic adviser to the Singapore Government.
Jee Say’s analysis and prescription are ‘persuasive’, according to Lord Butler who as Head of the British Civil Service in the 1980s and 1990s, oversaw the “painful transition” of the United Kingdom from a predominantly manufacturing economy to a knowledge-based one:
“As the former Head of University College, Oxford University, where Tan Jee Say was a student, I am happy to commend his essay “Creating Jobs and Enterprise in a New Singapore Economy -Ideas for Change”. I am not an expert on the Singapore economy but I was Private Secretary to Prime Minister Margaret Thatcher and Head of the British Civil Service in the 1980s and 1990s whenthe UK was making the painful transition from a predominantlymanufacturing and mining economy to a knowledge-based one.Against that background, I find Jee Say’s analysis and prescription persuasive. It seems to me a thorough and well-argued piece of work and as such it deserves the attention of policy-makers.”
You can read Part One here.
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Minimum Wage and Workfare
Our workers deserve a decent and dignified living that is made possible with a minimum wage.The alleged negative effects of a minimum wage are alarmist in nature and do not standup to practical experience in countries that have implemented a regime of minimum wage; more than 90% of countries in the world have some form of a minimum wage. It will ensure that Singaporean workers are not short-changed and under-cut by foreign workers.
A minimum wage is more superior than a levy in reducing the flow of foreign workers. A higher levy raises the cost to an employer of hiring a foreign worker but the increase in cost goes to government coffers not to the worker, so the employer ends up coughing out more money for the same quality of worker. On the other hand,a higher wage attracts a higher quality worker as it goes directly to him, so the employer benefits from a higher output, thus contributing to raising theoverall productivity level. The Workfare Income Supplement (WIS) is a poor substitute of a minimum wage as it represents only a meagre amount (about$83 a month) and is paid by Government using taxpayers’ money and hence does not hurt the employer who can merrily continue to hire cheap foreign workers. Coming from the taxpayer rather than the employer, the transfer payment protects and enhances the profitability of employers and widens the gap between the rich and the poor.
In the 10-year period from 1998-2008, theaverage incomes of the poorest 20 per cent of households fell by -2.7 per cent,from $1,309 to $1,274 whereas the richest 20 per cent of households saw their average incomes rose by 53 per cent, from $12,091 to $18,472.
Income Inequality- when growth stops trickling down
The problem of income inequality has become much worse in recent years. Singapore’s Gini coefficient (a measure of income inequality from 0 to 1.0 with 0 representingcomplete equality) has risen from 0.428 in 2002 to 0.471 in 2007 even after accounting for government benefits and taxes. These numbers put Singapore “in league” with poor developing countries of the Third World such as ” the Philippines (0.461) and Guatemala (0.483) and worse than China (0.447). Other wealthy Asian nations such as Japan, Korea and Taiwan have more European-style Gini’s of 0.249, 0.316 and 0.326.” Hasn’t Singapore “graduated” from Third World to First World a long while ago and if so, shouldn’t Singapore be “in league” with other rich First World societies rather than with poor developing countries?
The conventional wisdom of development economists is that economic growth will “trickle down” and benefit the poor. This was true in the earlier stages of Singapore’s economic development but has not been so in recent years as more and more Singaporeans particularly the older ones lost their jobs while those with jobs experienced falls in their real earnings. Yes the GDP has grown and it has trickled down but it flowed through Singaporean workers and bypassed them to benefit cheaper foreign workers at even lower levels. It is hardly surprising that more than half, perhaps more than two thirds ofthe 112,500 new jobs created in 2010, had gone to and benefitted foreigners. A minimum wage will stem the trickle of jobs downwards to cheaper foreign workers. As for foreigners on “S” and “E” passes which do not require employers to make CPF payment on their behalf (although a small levy is imposed on the “S” passes), an equalisation charge should be imposed on their employers in order to level the field for equivalent Singaporean professionals.
Cost of living and Government budget surpluses
The ultimate objective of all economic activity is to raise one’s standard of living. A minimum wage will help. But cost of living has been creeping up and eating into real earnings ; as import prices have been declining, the increase in consumer prices have been caused principally by domestic factors where Government policies on labour, land, housing, transport, public utilities charges for electricity and water, GST (goods and services tax), education and a host of others, have a dominating effect. These policies have boosted Government coffers and the ordinary citizen has been made to contribute to it in a hefty way that offset the beneficial effect of lower import prices that he can rightfully expect from living in an open economy. This need to be put right.
We can begin by examining the Government’s basic philosophy and practice of using the price mechanism to regulate the supply and demand of public services. When the demand for any public service goes up, the instinctive response of Government is to raise its price in order to dampen demand.Using the price mechanism is a no brainer and is often a guise for revenueraising that has contributed to the huge Government budgetary surpluses year after year. The Electronic Road Pricing (ERP) scheme is an example of theuse of pricing mechanism that has gone wild with ERP gantries popping up here, popping up there and popping up everywhere, faster than jack-in-the-box. While we could understand and accept why a profit-oriented private enterprise uses the pricing mechanism, we expect a higher moral purpose from Government which should devise and implement administrative measures to satisfy public demand without opting for the easy way out of raising price inthe first instance. Higher prices should be considered only as a last resort after all possible non-price options have been explored and exhausted.
A comprehensive review of all Government fees and charges should be undertaken immediately to see if the pricing mechanism has been abused often for revenue purposes and if so, corrective action taken without delay.We can start with the GST by waiving it for basic food items and reducing it for all the rest, and eventually doing away with it altogether. This will help arrest the decline in the real earnings of citizens particularly those in the lower income group and eventually raise their living standards. Isn’t this what economic development is all about? The huge Government budget surpluses that have accumulated in past years, provide sufficient buffer for Governmentto reduce or remove unnecessary taxes, fees and charges without the fear that it would result in budget deficits. In fact, the persistently huge budget surpluses recorded year after year imply that the Government has over-taxed the people by raising revenue from them far in excess of what it needs to provide and keep public services going.
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The writer was with the Ministry of Trade and Industry from 1979 to 1985 where he headed economic and manpower planning and also served as secretary to the late Dr Albert Winsemius, the economic adviser to the Singapore Government. From 1985-1990, he was the principal private secretary to Mr Goh Chok Tong. In 1990, he went into investment banking and subsequently took up fund management. He is a Chartered Fellow of the Chartered Institute for Securities & Investment. He is a graduate of Oxford University where he read philosophy, politics and economics.
He will be sharing his insights of the Budget 2011 this coming Saturday 19th Feb at TOC’s Budget Forum 2011.
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Dear Mr Tan and fellow readers, I read all 3 instalments before writing. The ST carried a much-edited version of this article and does not do it justice, in my opinion. The ideas in here are in the right direction and will find very strong support, I’m sure. Without an avenue to implement these ideas, however, we will not see real change which will benefit all Singaporeans.
The statement “In fact, the persistently huge budget surpluses recorded year after year imply that the Government has over-taxed the people by raising revenue from them far in excess of what it needs to provide and keep public services going” is definitely true; in fact, I would say that not enough has been done on the public services side which is quite plain to see – helping the less well-off to meet their basic needs. That is, in my view, part of the reason for the high surpluses.
We need to have accountability for where our funds go to and what purposes they have been used for, to benefit Singaporeans.
Visit the Singapore General Election Portal SGEP for more good reads and links.
I read all the 3 installments too and find the essay logical, strong and fully disclose the handicapped in PAP camp. Poverty is not entirely global problem. They are created internally by policians to stay in power. When peoeple becomes poor, they can whip out laws at their whims and fancy. When the country is divided, we will see one country two systems at play. It betrays the message behind our national anthem. I am shocked!
Convincing and strongly defended ideas.
Clap clap good article.
I remember when GCT spoke about surpluses and this silly idea was brought down from Britian during Magaret Thatcher’s rule.
They even coined a name for it, can’t remember now. Almost all govt departments were made to function as a profit center, in its strictest sense.
LKY did save up enough reserves, even before this profit ctr implementation. He was afriad SG might go broke.
However, this became the new mantra and ever since Singaporeans had to
pay and pay.
Surplus generation has taken its own dimension.
Today we can see that, even if the Budget is breakeven.
Last year or the year before a serious budget surplus came about, until Eunice Olsen had to ask PM Lee, why the budget was a BoBo shot.
(why the marksmenship was so off target, nicely coined by her).
This over reaction in ‘must generate surplus’ culture has brought about great problems to many in Singapore.
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The other day, the boy under my blk had to shower in school. Yes, water & electricity ran out of top up. He is in Pri 1, less then two months into school, he had to do that. The problem is now solved.
Singapore is regressing.
As a student in Singapore, one can only say that the current state of affairs is nothing less than depressing.
now,this is the spirit of those good brave OLD GUARDS who stood up to their PM WHEN THEY FOUND HIM WANTING.
THIS IS WHAT ALL HIGHLY PAID TOP CIVIL SERVANTS AND GOVT OFFICIALS should aspire to – a call to duty.
saying ‘YES’ when one really meant ‘NO’,is not only merely hypocrisy,it is BETRAYAL.
IT IS TRULY PATHETIC that NONE AMONG THE SCHOLAR-MIWs THINK honestly that OUSTING NATIVES out of their JOBS and livelihoods by way of the foolish FT POLICY is the ‘RIGHT’ thing to do and the WAY TO GO forward for Singapore.
if any of the MIWs can truly rationalise wisely on this policy with all sincerity and honesty that it is for the good of all in singapore,i would immediately be a ‘convert’.
sad.wisdom is not commonly found within intelligence…
Never heard of Tan Jee Say before, but we now we do. Great article.
We feel that the present situation is back to colonial times, the injustice, inequality and political suppression are overwhelmingly British Colonism in style
and substance. Look at the Judicial System, it’s always the rich, powerful and the influencial that is Law, the lesser mortals in capacity are always the losers.
Jee Say,
I am not a fan of Workfare and believe it should be scrapped but
“A minimum wage is more superior than a levy ….. a higher wage attracts a higher quality worker….”
How so?
For argument’s sake, lets say a job pays $1000 pm and the FW levy is $500, making the total cost to the employer $1,500. So, it would benefit the employer to employ a Singaporean at, say, $1400 ($400 higher than the FW is willing to accept).
Now, lets say the levy is increased to $1000. It will now pay the employer to employ the Singaporean at, say, $1900 pm or $500 more than previously.
So the FW levy can be used to both raise Singaporeans wages and dampen the inflow of FWs.
Tightening the FW quota will also have the effect of raising Singaporean’s wages on the principle of supply and demand.
A minimum wage, on the other hand, is more contentious. There are many other things that can be tweaked in Singapore before looking at introducing a MW.
Some jobs are fixed in their description so it is not clear how “a higher wage will attract a higher quality worker….”. Eg a bricklayer is still a brick layer, whether he is paid $1000 pm or $1500 pm.
So Mr Tan Jee Say do you intend to contest in the coming general election under the opposition flag and fight for your fellow Singaporeans against your former boss?
I say please take part in the election and be counted. Do something in the parliament that can really hurt the incumbent. What say you?
Is time to dish out all the trash from all the BS.
Over the year, gahman has increased Cost of Living BUT has NETITHER improve Standard of Living NOR Living Quality.
Simple just breath the air around us, do you think it still smell fresh like b4.
We need replacement in Gahmen to bring in New Ideas.
Peter Sellers
There may be a flaw in your example. In a job that pays 1000, and levy is 500, the FW usually only gets 500. You don’t add them up to 1500.
EVEN if you do, and say the local is ‘cheaper’ at 1400, I can bet you the FW is willing to accept a $101 paycut, to make himself cheaper than the local. It becomes a situation where local vs foreign competing to see who can be had for a cheaper wage. Foreigner usu wins since his cost of living (in his home country is low).
A min wage on the other hand FORCES the pay to be at a certain level. BOTH the local and the FW has to be paid at the same rate. Thus WITH the levy, the local becomes the cheaper alternative. WithOUT the levy, they at least competing on same level, with the local having a slight edge (culturally).
Peter Sellers
Some jobs are fixed in their description so it is not clear how “a higher wage will attract a higher quality worker….”. Eg a bricklayer is still a brick layer, whether he is paid $1000 pm or $1500 pm.
In my humble opinion, a ‘cleaner’ is pretty much the same as a bricklayer…
And you can read more from the Richer,Kinder,Slower article. Here’s an except that might be relevant to your concern:
In one episode of Undercover Boss, one employer discovered differences in the cleaning teams in two different caravan resort parks, both of which he owns.
Among the better performing team, wages were notably higher – the team supervisor there had cut management staff, and used the money to boost the salaries of the cleaners. Instead of management breathing down the cleaner’s necks, they implemented random spot checks. The cleaning team responded to this greater independence and higher pay by becoming more diligent, motivated and cheerful.
It is apparent the PAP government has become money-centred than people-centred and it is high time to kick them out like Mubarak.
no idea what this topic is all bout too chim for my cambridge boat rowin days..
even leekingyou got no bloomin idea though he a cambridge man himself..ow he graduated is way beyon for me to xplain
butt in my life as a fello pheansant( see? i also degrade meself) i know i am broke/dead and in dire straits livin on a day2day basis..
the thumb rules of my survival is simple
eat what you can afford (for me my daily 1 or 2 homecook porridge is more than enough) splashed it out when/if i get2get a good adhoc job(but than again outside food is so riched in oil/greased & fat which is bad for our body system) i no longer induced in such ^luxuries^
Lobo76, I take your points generally.
In my example, I had taken $1000 as take-home pay for the worker and the levy as an additional cost to the employer. There is a base-pay for FWs (the market rate*) and the total cost to employer is base-pay + levy.
I am willing to be corrected but I think the FW levy is a cushion in favour of the Singapore worker and, so long as the levy is high enough, the local worker can always draw more than the FW, up to the cost of the levy. The key for this to work is that the levy must be sufficiently high.
Although the MW has been implemented in many countries, Singapore’s situation is, I think, unique. The closest analogy is with Hong Kong but even HK doesn’t have the high number of FWs as a percentage of the population that Singapore has.
So, my point is that there are many things that can be tried in Singapore before we resort to a MW: tightening the quota on FWs, increasing the FW levy significantly and so on. Because the Singapore workforce is limited in size, once the supply is tightened, wages should start to rise.
* the market rate takes into account the FWs home-market rates, discounting etc (just as the market rate for foreign maids)
Peter Sellers the logic is simple enough.
In a levy, the government gets to keep the money and lose it through GIC or TH.
In a minimum wage, the worker benefits.
Well done, Mr Tan. If more elites and beneficiaries of the system like you speak up for justice and equality, Singapore will be a nation and not just a city and Singaporeans can hold our heads high and sing our national anthem and recite the Pledge with pride and conviction.
More people like Mr Tan should stand up for SIngapore or there is no hope for my children, A definite no for CHiam & Low . They are just plain useless. What had they do for the past 10 years?
dear hope,
Chiam spoke up for the ppl detained without trial, upgraded the lifts at a lower cost, survived more than 25 years in a hostile political environment, stood to his principles despite his physical infirmities.
given the same odds, u could not have done better yourself.
After reading the “ideas”, my view is that they are not substantiated with evidence. The issues are more complex than are presented here.
An example is the issue of minimum wage. There are arguments for and against, but I must say that the author’s argument is quite unconvincing and is based only upon conjecture. Also, there is no mention of the long-term erosion in competitiveness that may result from the implementation of a minimum wage.
The author also doesn’t give enough credit to what is already being done. For example, MOH already wants to build more hospitals and add beds (e.g., Jurong Hospital in 2015), but one can’t just throw money at the problem. The key issue is finding and training the healthcare professionals required.
The writer also doesn’t give enough attention to “outcomes”. For example, on education. While he argues that we need smaller class sizes, his argument is undermined by the fact that Singapore students are already amongst the best in the world, even with our current class sizes! Where will we find more teachers?
If we train more teachers, might they not be either of poorer quality (looser recruiting standards), or take away talent from other parts of the economy? Why don’t we use those resources to develop better training for our existing teachers, to improve pedagogy, and to give our schools better facilities and our students greater financial assistance.
As to his arguments about productivity and IRs… well it’s up to the reader to make up his own mind. Regarding GST exemption for basic food items, the counterargument is already found in Wikipedia.
Ultimately, the key thing he forgets to mention is how the government is supposed to fund this new spending.
unimpressed: the fact that Singapore students are already amongst the best in the world, even with our current class sizes!
Do you know how big is the tuition industry in S’pore? If the system is so great, there won’t be a need for so much tuition!
unimpressed: The key issue is finding and training the healthcare professionals required.
Increase pay, but then that will push up health care cost, so it is a fine balancing act
Then again, if no one has promoted S’pore as a medical hub, our health care professional will be for citizen and residents. I don’t know how big this industry is to comment if the impact is substantial.
And of course fighting for the same linited resource with wealthy foreign patients increase cost to S’poreans
So how abt the life of many engineers who devoted their life in manufacturing sectors? Do you ask them to phase out???
@ unimpressed on 20 February
There will always be arguments for and against every policy proposal.
However, the writer has clearly identified the large-scale influx of foreign workers and immigrants as one of the key factors holding back the development of our society and this remains the root cause of many of our problems
One of the things that emerged at the TOC budget forum on Saturday is that Singapore has slipped on many social indicators, such as number of hospital beds, doctors and nurses per 10,000 people over the past 20 years. What was once adequate for 3 million people in 1990 became less so for 4 million in 2000 and is now hopelessly inadequate for 5 million in 2011 (the number of hospital beds has remained unchanged over the past decade). We have actually gone backwards.
So long as this government remains obsessed with growth, the problems are unlikely to go away. Planning has failed to keep up and, indeed, can hardly keep up with the extraordinary influx of people at 10 times the historical rate, given the physical limitations of this country.
Singaporeans are not digits; nor are they Egyptian slaves content to work for barely rising wages to build modern day pyramids for their masters. And all to feed the insecurity and Freudian obsession of our collective leadership to outgrow and outpace Malaysia, the country that once “threw” us out.
This obsession with growth coupled with inequitous distribution of its benefits has, in my view, begun the undoing of both this government and the country.
dear unimpressed,
quote: “Ultimately, the key thing he forgets to mention is how the government is supposed to fund this new spending.”
this is not my intended answer, but since u ask a YPAP forum type question, i will give u a YPAP fourm type answer:
the government can fund it using the surplus $4 billion which it intends to put back into the reserves, the government has no constitutional obligation to do so.
next, on GST,
please don’t quote n read Government statistics blindly, learn a bit from Mr Leong Sze Hian and analyze what u hear.
do u believe it when i tell u that the rich and affluent consume more basic necessities than the poor? on what logic?
just becos they can afford it, the rich consume twice the amount the rice & cooking oil they eat daily?
if i exempt painkillers from GST, except for drug abusers, would the rich deliberately consume more painkillers daily?
can jee say run for the president in August? He’d be a good candidate.
Shouldn’t any Singaporean be allowed to run for the presidency?
After all, what is LKY afraid of, by imposing the arbitrary pre-requisites, if the presidential candidate can garner sufficient popular votes?
As far as I understand to improve the standard of living and quality of life of the 75% of singaporean who own just 1 property get my message to unite and demand the followings:
1. DRASTICALLY INCREASE THE ANNUAL PROPERTY TAX FOR 2ND PROPERTY AND ABOVE
2. FOREIGNERS AND PRs CAN ONLY PURCHASE LIVE-IN PROPERTY, ie NO RENTAL OR SUB-LETTING ALLOWED
3. THE ABOVE WILL AFFECT ALL FUTURE AND EXISTING INVESTORS WHERE THE RECENT RULES ONLY TARGET CURRENT INVESTORS(WITHIN 4YRS).
To all singaporean – 1st property is not be taken as an Investment but Necessity!
Our land is finite and fast diminishing we must DISCOURAGE property as a form of investment in land-finite Singapore
WE NEED TO PRESERVE THIS SACRED COW or the end results can be disastrous for our younger generations
Don’t be too happy if you are currently staying in a big posh house, if you have more than one kid, and if they fail to make it to the top 10%…..good luck…they may need to fight over your property when you pass-on
I’m sincerely concerned about we singaporean going forward especially the younger generations…….how can our children ever live a good quality life if they have to be on this high-speed treadmill their entire life just to afford a roof over their head!
Therefore to the the >80% of SINGAPOREAN let us unite to protect our future generation
There is no comparison between Singapore and other major cities like Shanghai, beijing, Tokyo, New York, London, mumbai,etc THEY ARE JUST CITIES WITHIN A BIG COUNTRY…
..SINGAPORE IS A LITTLE RED DOT WE CANNOT SIMPLY MOVE OUTSKIRT TO MALAYSIA OR INDONESIA RIGHT!!!!!
I SINCERELY HOPE OUR POLICYMAKERS ARE AWARE OF OUR LIMITATIONS
He mentioned NOTHING about the very real potential of a more sustainable economy that has a lot of Green Design and Innovation.
Nothing on the need to grow more food locally.
Nothing on developing medical technologies that are specific to tropical conditions.
Nothing on revamping the Airline industry to provide safer planes and engines that emit less emissions.
What about maximizing the on-site potential of retrofitting HDBs?
What about reducing transportation derived CO2 emissions from cars by 20%?
Hydrocarbons by 70% Carbon Monoxide by 95%.
How about providing the retrofits for every Airconditioner in Singapore so that they use 15-25% less energy under Business as Usual conditions to start with. The savings can be immediately transferred to other spending avenues that provide a stimulus for the Domestic Economy.
Energy savings would also reduce stress on people . Birth rate could go up and then the country would need fewer people from overseas to prop up the tax revenue.
The recycling industry is in such a stage of infancy that it is prime for more innovation.
Agreed totally on the write-up on cost of living.
Tan Jee Say is a highly regarded economist and star administrator in the government. That he has the moral conviction and courage to criticize his former bosses, not known for magnanimity, is a tribute to him. His announcement to stand for election on an opposition ticket deserves high praise. Let’s vote for him rather than those PAP weaklings being fielded this time.
It is always easy to be an armchair critic. I will be one now. Wouldn’t we need more schools to raise the ratio of teachers from 1:20? There is no study to show smaller classes are necessarily effective. There are 360 schools now, are you proposing we double that as well? Are your proposing we double the number of school administrators? How are we going to get the additional 30 000 teachers? Currently, teachers must be within the top 30% cohort to be eligible. Do we lower the standards so that more people can be teachers?….. The devil lies in the implementation. Well, like I have said, it is easy to be an armchair critic…
I agree with “Vote for change”. The devil is only in the details. Furthermore, I believe the three recessions we had in the last 15years were due to global effect, and the government did a good job steering the ship through trouble water. Alot of the problem in Singapore is inter-link to the globe. Curse globalization if you want.
And I also want to know what do Mr Tan JS propose about the engineering industry? Quoting one of the CEO from the industry, there are 3 ways to generate wealth. 1. Dig them up, 2. Grow them, 3. Convert something of lesser value to greater value. IMHO, moving entirely to a service-based economy may leave us more vulnerable to global perturbation.
I think min wage cannot work in Singapore. If given to Singaporeans and did not give to lower income foreign workers, then it is very sensitive. To give to the lower income foreign workers, then the amt can be too much for them as most of them came from 3rd world and such sums do not make economic sense for us. For foreign semi-skill workers, if they are not entitled, then it becomes sensitive as well.
I think PAP progress package is more clever is this aspect. Kind of camouflage of min wage scheme. However, i think they should give more frequently so that it is more impactful.